Risk as a subject is rarely understood by investors and the general public. Thus, we have shortcuts for risk based on our perception, and/or experience. Mostly, it’s perception and illiteracy. We think that an equity mutual fund investment is far riskier than a fixed deposit. This is because most investors think of Risk as Market Risk. They miss a key point that is captured by the next 14 words.

Financial Crises don’t come from risky assets going bad, but from safe assets failing…

I would add a few more words to the above line.

Financial Crises don’t come from risky assets going bad, but from safe assets failing…

a. to protect the value of your money (to protect you from the killer lifestyle inflation)
b. to let you outlive your money
c. to leave a meaningful legacy in this world

What do you think?

As always, I would love to hear from you.